Sorry Purism, I’m not investing. It’s (possibly) not even legal
gabrielsieben.tech
gabrielsieben.tech
But watching them destroy themselves isn't fun. I've recommended Purism laptops to multiple people, only to have Purism ship them faulty machines (twice now, and my laptop shipped with a defective screen). I've watched the phone development with interest, but never got to the point where I felt comfortable actually ordering one. It feels like they're trying too many things at once instead of doubling down on making the world's best Linux laptop.
I receive their investment emails but I don't invest. I'm a customer in this relationship, not a shareholder. If they really want their customers as their shareholders then they should consider switching to being a co-operative.
One of the problems is probably that "the world's best Linux laptop" on its own is probably quite hard to build a viable business on. The demand is relatively small, and there's quite a lot of competition – not just from other Linux-only vendors like System76 but also just "mainstream" laptops you can buy everywhere – my cheap Acer runs Linux quite well.
It also doesn't help that Purism 14 gives me a 4-year old CPU for $1370, which is ... not great, especially when System76 gives me 2023 CPU for $200 less.
I wish they would talk to a good accountant first. I believe they have good intentions, but this could cost them more than they think.
why do you assume they haven't spoken to an attorney? what is your expertise in this area? serious question.
Accredited investor requirements are NOT “a good faith requirement,” and there absolutely are ways “for Purism to validate your accredited investor status.” This statement, in a general solicitation e-mail no less, would not get sign off from any competent securities counsel.
Their fundraising site is tighter but still leaky. The notes are governed by Washington law [1], for example, which means e.g. they can’t ignore investor protections for non-Americans (as they claim). Also, other jurisdictions have securities laws—it is incorrect to claim if “not a United States citizen there is no restriction to invest” [2].
Finally, they are selling these notes through their store, which offers check out with Stripe. I was able to get to a credit-card checkout page. That’s a no-no on multiple levels.
(If you want to do something like this properly, look into Tier 1 Reg A+ offerings [3]. There are turnkey providers, e.g. StartEngine [4], though I'm skeptical of anyone requiring large up-front payments.)
[1] https://puri.sm/wp-content/uploads/2021/07/purism-convertibl...
[2] https://puri.sm/ir/convertible-note/
[3] https://www.bartonesq.com/news-article/reg-a-offerings-faqs/
[4] https://www.startengine.com/blog/regulation-a-what-entrepren...
Because an attorney who knew anything about securities law would have put a stop to this immediately.
It’s not uncommon to give first-close investors a perk for committing early. That said, it invites scrutiny when targeted at retail investors. (In a vacuum of diligence no less.)
Nov 2022: 2,664,000 / $3,500,000
Dec 2022: 2,664,000 / $3,500,000
Today: 2,725,750 / $3,500,000
They've made a wonderful product with an admirable approach, but something feels wrong here.
[0] https://web.archive.org/web/20221128104123/https://puri.sm/i... [1] https://web.archive.org/web/20221207172005/https://puri.sm/i... [2] https://puri.sm/ir/convertible-note/
Is there any chance the $2.1 million they raised back all the way back in 2017 is being factored into the number to make it look better? (I literally have nothing to back this theory, I'm just asking.)
The company can, however, attempt to stay afloat and prosper enough to make creditors whole.
I must express my skepticism about this one as well. The article appears sensationalist, with numerous strong statements accompanied by qualifiers, such as "potentially illegally misleading" and "Ponzi scheme if the anecdotes are true." These claims, which rely heavily on anecdotes and hunches, lack factual substance. Some just seem wrong. For instance, the author incorrectly associates low liquidity of notes with fraud, when some financial instruments are simply less liquid. Furthermore, there seems to be a personal bias against Purism, as the investment returns are criticized, even though they are unrelated to the primary topic of questionable legality. The use of emotional language, such as "shady," "sketchy," and "icky," adds no factual value.
Considering the blog's history on HN, my skepticism is heightened. While I'm open to the possibility of Purism's investment solicitation being suspicious — perhaps such a case can be made, I expect an investigative piece to provide more facts and less speculation. It would have been appreciated in this case.
I accept that, and will try to write better in the future. However, I also subscribe to the philosophy that if nobody talks, who will? And so if I have questions, I would rather raise them and be 25% wrong, than leave them undiscussed until they potentially hurt someone. At a minimum, everything gets clarified, I might look like an idiot, but there's still a clarity there that there wasn't previously. Though, as I will admit, my verbiage could be improved and I haven't resorted to having ChatGPT clean up my articles for me yet.
> I expect an investigative piece to provide more facts and less speculation
I can only speculate in the hopes that maybe someone, somewhere, will do a serious investigation. If you can, please do. Everything has to start somewhere though and it hurts to be first.
The choice of language in an isolated sense is fine. Unique writing styles can be more interesting to read, overall.
it doesn't sound like a fraud, unless you or OP have expertise or information that you're not sharing? Fraud is a crime, you should have a basis for declaring it.
it might be a poor investment, it could be seen as signs of a shaky company, but accusing a people of fraud should have a basis.
disclaimer: i have no relationship to this company whatsoever, including I'm not a customer. i just don't like seeing facially ill-informed piling on
This is not a court where we need to prove anything, it's just a discussion about a blog post. It's perfectly fine to say something sounds like a fraud based on limited knowledge.
We shouldn't trust companies by default, just because they promise things that we want.
If a company makes an investment offer that sounds a bit questionable, it's fine to say it sounds like fraud, even if we don't have any concrete evidence for it. It's on the company to provide information that makes them trustworthy. If their marketing materials are contradictive, or elude important info, that's more than enough to call them out for it.
Did you read the Brydge story [1]? They started selling preorders for some product as recently as January, when they already ran out of cash. Judging from the "investor email", it sounds like Purism is doing the same thing, except they aren't selling preorders anymore, but just asking for cash instead.
[1]: https://9to5mac.com/2023/05/04/brydge-keyboards-out-of-busin...
There is a difference here though, which is that those companies openly tell investors, "we're not profitable," and even have projections in their documentation for when they will be profitable assuming current growth continues. For example, Disney+ warns investors that it is not a profitable business but is trying to get to the point of profitability by the end of 2024. They also have regular public financial statements clearly outlining exactly how much revenue they received, expenses they paid for, and profits received if any.
Now, sometimes these projections are... very optimistic like Spotify; but they are still there and check many legal boxes. Unprofitability is not a concern if it is disclosed. Basically anything is OK if there is clear and full disclosure. Purism does not have a disclosure anywhere saying whether this is, or is not, true. You are just left to assume that the company is solid, happy, and solvent without much substance that I could find (not even the most basic Profit/Loss statement), unless I missed some obvious documentation.
Do they publish financial statements to their investors or prospective investors? Perhaps it would be useful to ask for those and see for yourself. If they mislead investors through not providing statements or playing games with the numbers, then you have evidence (!) — something that would strengthen your article a lot.
But that doesn't seem to be the case here. Reading between the lines, it sounds like Purism lacks the funds to fulfill the preorders that have already been paid, and the "investment" will just go into fulfilling existing orders. There is little potential for future profit, and instead it just sounds a bit like a ponzi scheme, where they have to keep finding new people to invest in the company.
In sociology, 'investment' often means the expenditure of time or energy into a cause or relationship. In personal finance, 'investment' pertains specifically to the use of financial instruments or products. Overall, 'investment' can mean many things; there isn't really one thing it usually implies.
In the context of business and finance, 'investment' indicates the allocation or transfer of money/resources. However, this doesn't necessarily lead to the acquisition of any assets other than the money itself. For example, I could invest capital into my own company without immediately allocating that money to specific uses — it could just sit in the corporate bank account. The funds could eventually be used in a variety of ways. While it's both morally and ethically commendable to inform investors about the intended uses of their investments, there's no definitive principle stating that such investments must be allocated to specific items like tooling, R&D, and the like.
I understand why people who think that investment implies that would be disappointed by Librem's actions here. But from a business perspective, investing into fulfilling past orders is fine, it still adds business net worth and investor value. Many large companies like Tesla do it, too.
It is not a Ponzi scheme unless the previous investors are directly paid dividends from new investors. A Ponzi scheme is a very specific term. Many businesses operate in a way in which investment grows the business, and this growth pays dividends to previous investors. That could be seen as a Ponzi-like scheme from some perspectives, but it would be a bit contrived, as this is how many highly-leveraged businesses operate.
Consider alternative perspectives, and attempt to steel-man the position opposite to the one you wish to present. As you mention ChatGPT, GPT can assist in providing counterarguments, helping you see the fuller picture.
Keep in mind that condemning articles can have consequences. While Librem could hurt their investors — the risk is actually inevitable in most businesses, your blog can also harm those striving towards a noble cause.
Best of luck with your future articles.
Sparking and sustaining a field is tough, and it's clear Purism has had difficulties.
I hope they get through these. I believe the movement relies on their existence and continued development.
Unfortunately, QWERTY versions would not enjoy the same scale of economy, mostly due to dexterity requirements that would alienate the usual target audience.
That's simple - because the production batch that covers all the remaining backorders is already on its way: https://puri.sm/posts/where-is-my-librem-5-part-3/
It simply hasn't been updated and at this point likely won't be until it shows "in stock" instead.
> I’m starting to see the light at the end of the tunnel, but hitting shipping parity will depend on the E5 production run going according to plan, and our not hitting any more supply chain snags along the way. Because of this uncertainty, I have not yet updated our 52-week lead time on new Librem 5 orders, and will likely not update it until the E5 production run is complete and waiting for its turn to ship to customers. [...]
So, they are keeping the 52-week out of "uncertainty". Which is fine, by all means. However, they are quoting 8 weeks to investors without mentioning the uncertainty. Which is legally worse? Misleading customers, or misleading investors, if that uncertainty materializes? Especially on a sale that does not appear to meet other legal checkboxes like investor status verification?
> Especially on a sale that does not appear to meet other legal checkboxes like investor status verification?
According to you.
According to an actual private equity manager in this very thread.
If they are indeed panicing, I'm surprised they managed to end up in that state even as they are unable to keep up with demand. Unless this whole thing with being out of stock permanently is an intentional strategy to reduce risk of unsold inventory?
In the past I have seen self-certification for Accredited Investor status, as well as out-sourced services that verify some data for a determination.
I think response around what is legal or not is best left to those with a background and education in the legal profession.
At a minimum though, I think we can agree that it is questionable conduct.
Note also that what you call "self-certification" is just ... it's how things are for everyone? It's not like you can ask the SEC for a piece of paper documenting that you qualify. There are some professional licenses that automatically count, but if you made $210,000 in W-2 income last year there's no report submitted to a central registry of People Allowed To Make Risky Investments.
https://www.sec.gov/education/smallbusiness/exemptofferings/...
The requirement they seem to follow is: "all purchasers in the offering are accredited investors and the issuer takes reasonable steps to verify purchasers’ accredited investor status"
Purism argues that everyone must be an accredited investor; but they state they take no steps to verify anyone. They even say that it is impossible to comply with the law ("since there is no way for Purism to validate your accredited investor status"). Well, what is it then? Are they securities or not? If they aren't securities, why the accredited investor requirement? Are you instead going under Rule 504, which seems to prohibit anything publicly offered? If 504 doesn't work and you are ignoring a requirement for 506, is there some other section, or is it just (arguably) flat-out illegal?
It doesn't take a lawyer to say that something's fishy. While the law is probably fuzzy on what that verification requires, Purism could at least just call people on the phone, and say, "hey, we need accredited investors, are you one? Do you fully understand what this means and what your obligations are?" And record the response for legal purposes.
it would be much more reasonable for OP to note that they don't have a clue if anybody would be breaking the law
Your teenaged kid takes your car without you knowing and kills somebody in a car accident. Drunk. On your alcohol. Did they steal it? What's your liability? Do you need to talk to a lawyer, or is it reasonable for OP to give you his opinion?
> it would be much more reasonable for OP to note that they don't
> have a clue if anybody would be breaking the law
> Your teenaged kid takes your car without you knowing and kills somebody in
> a car accident. Drunk. On your alcohol. Did they steal it? What's your
> liability? Do you need to talk to a lawyer, or is it reasonable for OP to
> give you his opinion?
What kind of person would look at the facts of that situation and think "hmm, I dunno, this law stuff is difficult, no way for me to know if I have any legal risk"?
the same kind of person who thinks that this company didn't consult their attorneys but is just winging it, so they decide to go on HN and just wing it, and they find good company here.
Tangent, but I just want everyone to recognize how obscenely absurd this (largely true) sentence is. How are we, the vast bulk of non-law-school-graduates, supposed to follow the law in our day to day lives if just figuring out what's legal literally requires multiple college degrees?
The reason lawyers get paid so much is that if you're doing something that is right on the boundary[0] then the difference between legal and illegal might be extremely fuzzy, and also worth a lot of money, so it's worth paying someone $1000 an hour to write a long brief in your local judge's preferred WordPerfect template about why what you're doing is OK.
On the other hand, the SEC website linked by OP just has a checklist of Accredited Investor qualifications, and it's possible to read them. Do you have a salary of $300,000? You qualify. Did you make $195,000? Well, that's less than $200,000 so unless one of the other checkboxes matches, you're out of luck[1].
[0] Maybe it's illegal by the letter of the law but you think it shouldn't be, like ride-sharing in locations with taxi regulations. Or maybe it's not illegal but might be viewed with extreme skepticism by regulators, like offering a non-fraudy Bitcoin exchange. In both of those cases, there's an easy solution (just don't do the maybe-illegal thing) that is accessible to the layman.
[1] Maybe you can hire a lawyer and/or CPA to get your $6000 of undeclared dog-walking income counted for the purposes of Accredited Investor qualification, but is it really worth the hassle?
The US has multiple forms of law, Legislative Law, as ratified by the Legislative Body. Then Case Law which is law introduced by Judicial courts which may or may not invalidate, expand, or change the legislative law. The US also has courts under specific bodies such as the EPA.
Lawyers exist to be able to tell you “the law says x, however the most common case law actually says Y.” In terms of investor, patent, and IP law this is SIGNIFICANT. You could be violating the investment laws enacted by the legislature; but it could be entirely legal because a court in your district invalidated that law. However, you fly to New York, a different district, and it’s illegal again.
Determining what is legal and what is illegal can be exceptionally difficult. Because the layman doesn’t have access to the thousand dollar monthly subscription of LexusNexus to do case law searches. They probably don’t even know that this exists.
Another example - California has a law on the books that states that you’re not allowed to own batons and nunchucks….. Except in Yuba County, where a Judge has thrown out the law via a court case, and the DA never appealed the ruling. But if you’re arrested by the CHP, instead of the Sheriff they can try you in State Court, and it applies again.
You cite examples where the law forbids something, but a judicial opinion allows it. So one easy way to avoid doing something illegal in all of your examples is to simply follow the law as written.
Sure, maybe with legal counsel you could push things a little further, get your nunchuck possession charge dismissed because you were pulled over two hundred yards past the Yuba county line or whatever, but that's different from someone who wants to avoid getting in trouble in the first place.
One example: assault with a deadly weapon. The definition of "deadly weapon" various wildly in different jurisdictions and isn't always clear simply from the case law. In some jurisdictions it means any weapon theoretically capable of being deadly, so slapping someone with a flip-flop (real example) could count.
The easiest way to not go to jail for assault with a deadly weapon is to not assault people. It is very easy to follow this guideline, and the success rate is quite high (most people in the world are not currently in jail).
If you absolutely must assault someone, and you decide to use a weapon, then yes, you will likely want to hire a lawyer to write a bunch of carefully-argued pages about why you shouldn't go to jail.
But it's not like you would just be walking down the street, knocking people out with a tire-iron as one does, and then get ambushed by the complexities of the law.
I think a better example might be peaceful protest. Sure you can just not do that, but a reasonable person might want to protest. Here's another example: police officer tells you can march across bridge, then arrests you for obstructing traffic. You intuitively think this sounds like entrapment. It isn't.
I want to take a second to say how much I appreciated this line.
I don't consider "just stay away from the boundary" to be an adequate answer. Avoiding a vaguely defined zone of peril is not freedom. And as a peaceful, law-abiding citizen of a democracy, the law is supposed to work for me, to make my life better. Instead it works for those willing to casually break the law, and makes those rich enough to hire lawyers rich enough. If that doesn't sound like a problem to you, I don't know what else to say.
It's way easier for a private company to do some creative accounting and do away with your money without committing a criminally punishable offence. The idea is that if you have $1M in assets, you can tolerate that risk (or do your own due diligence), but if your entire life savings is something like $50K, don't give them to that sleazy guy on the phone that isn't independently audited or banned from pump-and-dumping his own stock.
> The SEC’s long-standing three-part mission—to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation
The Securities Act of 1933 contains the phrase "protection of investors" 27 times. It's quite literally part of their mandate.
Accredited investors are allowed to take risks without the level of oversight that "naive" investors are given. Selective quoting does not change that.
Yeah, those can be gamed, but if someone is willing to cheat on a test in order to remove their legal protections and access risky investments, well, good luck to them.
https://www.finra.org/registration-exams-ce/qualification-ex...
https://www.finra.org/registration-exams-ce/qualification-ex...
https://www.finra.org/registration-exams-ce/qualification-ex...
Pass any one of these, and you're an accredited investor.
This is for crowdinvesting only but this convertible note campaign is very similar to crowdinvesting campaigns in Germany. Although it is possible for companies to let investors invest directly, usually there is a licensed financial advisor running the crowdinvesting platform that handles payments by delegating them to a licensed payment service provider. The financial advisor is also supposed to screen investments and make sure the investor understands what form of investment he is making and how much risk he is taking on.
If you want to get past these limits you wouldn't go through a crowdinvesting campaign.